Are inmates managing your money?

Editing an article today on how diversification can help investors manage risk, I quickly lost count of  the number of times I change “equities” to “stocks” and “fixed income” to “bonds.”  And while I know those changes may raise my client’s eyebrows, I’m confident that making them is the right thing to do.

I also know that I’m not alone in this seemingly endless quest to speak with consumers in language they understand.

I have the support of the government’s initiative for Plain Language, passed in the fall of 2010, and dozens of experts on sites (like Plain Train) with a passion for communicating better.   More recently,  the investment companies themselves have taken up the banner.

In a Wall Street Journal piece published this spring about the difficulty that most consumers have with financial jargon, journalist Brett Arends cites the work that Invesco has been doing to eliminate jargon and confusion in financial communications.

Interviewed for that article, Scott West, head of consulting at Invesco Van Kampen Consulting, couldn’t have been clearer.  “You’ve basically got a language problem,” Mr. West says.  Or, as the warden in Hud so bluntly put it: “a failure to communicate.”

Apparently Invesco surveyed 800 investors to find out which words and techniques work best when advisors talk about investments and personal finance, and which miss the mark. Their conclusion:  Investors hate jargon and technical language.

So where people steeped in investments might talk about “equities,” “fixed income” and “asset allocation,”  they should be talking about stocks, bonds and diversification.  In fact, the WSJ reported, when Invesco tested the phrase “institutional-quality money management” in their focus groups, it prompted one participant to question why prison inmates were handling the money.

The need for financial literacy — and plain language — has never been greater as so many Americans are now in charge of their own investing decisions when they contribute to their workplace 401(k) and 403(b) retirement plans. Even the government is getting into the fray, according to a recent Forbes article.  It will be interesting to see how that plays out!


Leave a Reply